Vanguard on Inflation

[Mike4]

Geoff: Thanks for the link. I think it’s a bit motherhood and apple pie but I found this note interesting “ 3 Based on Vanguard's modelling, we think UK investors can expect 10-year annualised returns ranging from 4.6% to 6.6% in the case of UK shares and 2.8% to 4.8% for those elsewhere in the world.”

Is this in real terms?

No, it is in nominal terms, before costs and taxes. Inflation? The BOE target is 2%, but they are not good at keeping to that. 3% average over the next 10 years perhaps?

My view is we are in for 10%-ish inflation rates for the next few years, given the inflationary pressures already baked in and the probable reluctance of the BoE/guvvermint to raise rates enough to control it, due to the impact this would have on the massive public and private borrowing (built up due to overconfidence that low interest rates would last for ever).

[GeoffF100]

Geoff: Thanks for the link. I think it’s a bit motherhood and apple pie but I found this note interesting “ 3 Based on Vanguard's modelling, we think UK investors can expect 10-year annualised returns ranging from 4.6% to 6.6% in the case of UK shares and 2.8% to 4.8% for those elsewhere in the world.”

Is this in real terms?

No, it is in nominal terms, before costs and taxes. Inflation? The BOE target is 2%, but they are not good at keeping to that. 3% average over the next 10 years perhaps?

My view is we are in for 10%-ish inflation rates for the next few years, given the inflationary pressures already baked in and the probable reluctance of the BoE/guvvermint to raise rates enough to control it, due to the impact this would have on the massive public and private borrowing (built up due to overconfidence that low interest rates would last for ever).

The markets (and Vanguard) clearly do not agree, but no one knows the future.